Damodaran on Valuation_ Security Analysis for Investment and Corporate Finance ( PDFDrive )
Type of Business Sincebetasmeasuretheriskofafirmrelativetothemarket, the more sensitive a business is to overall economic condit ...
operating leverage (since they enjoy fewer economies of scale). Degree of Financial Leverage Other things remaining equal, an in ...
higher betas. The tax factor in the equation captures the benefit created by the tax deductibility of interest payments. Theunle ...
asset betas, with the weights based on market value. Consequently,thebetaforafirmisaweightedaverageofthe betas of all the differ ...
regression betas, we would suggest the latter approach. Averaging approach. The average beta across the comparablefirmscanbeeit ...
Estimate thelevered beta for the firm(and each of its businesses) using the unlevered beta from step 3 and the leverage from st ...
The bottom-up beta can reflect recent and even forthcomingchangestoafirm’sbusinessmixand financial leverage,sincewecanchangethe ...
consideredpartof thetheme parks,sincetheyderive their revenue almost exclusively from visitors to these parks. Consumer product ...
To obtain the beta for Disney, we have to estimate each business’s weightin relationto Disneyasa company.The valueforeachofthedi ...
Thiscontrastswiththebetaof1.01thatweobtainedfromthe regression,andis,inourview,amuchtruerreflectionofthe risk in Disney. Account ...
investinginequityatanyfirm.IntheCAPM,thisexpected return can be written as: where the risk-freerate would be therate on a long-t ...
market—about 3 to 3.5 percent when we look at the 1926–2004period.Thispracticecanbedangerousforthree reasons.Thefirst isthat the ...
help explain thehigh returns thatsome venture capitalists demand on their equity investments in fledgling businesses. 3.Adjustth ...
Kristin Kandy is a small privately owned candy-manufacturing business. To estimate its beta, we looked at publicly traded food p ...
Which of these costs of equity should we use in valuing KristinKandy?Theanswerwilldependonwhothepotential buyerforthefirmis.Ifth ...
Thedisadvantageofthisapproachisthatittarsallcompanies inacountrywiththesamebrushandassumesthattheyareall exposed to country risk ...
Thefirstistobaseitontheproportionofafirm’srevenuesin aparticularmarket,scaledtotheaveragefirm’srevenuesin thatmarket.Thus,acompa ...
premiumof4.67%estimatedforBrazil(fromearlierinthe chapter). The costs of equity resulting from the three approaches described in ...
Regression or Proxy Models Allthemodelsdescribedsofarbeginbydefiningmarketrisk inbroad termsand thendeveloping modelsthatmightbe ...
MV = Market value of equity BV = Book value of equity Thevaluesformarketvalueofequityandbook-to-priceratios for individual firms ...
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